GBP/USD holds below the 1.2700 mark, investors await Fed rate decision

• GBP/USD trades on a flat note with a mild negative bias around 1.2695.
• The Federal Open Market Committee (FOMC) is likely to keep the rate unchanged in the range of 5.25–5.50% for the fourth straight time.
• The Bank of England (BoE) is expected to leave interest rates unchanged at its first meeting of the year.
• The FOMC and BoE interest rate decisions will be the highlights of this week. 

The GBP/USD pair holds below the 1.2700 mark during the early Asian session on Wednesday. Later on Wednesday, UK Nationwide Housing Prices for January will be due ahead of the Federal Open Market Committee (FOMC) monetary policy meeting. The major currently trades around 1.2695, unchanged for the day.

The FOMC is widely anticipated to keep interest rates unchanged in the range of 5.25–5.50% for the fourth straight time. At the Fed’s December meeting, Fed officials expected three rate cuts in 2024. However, the meeting minutes revealed that the future of monetary policy remains uncertain. According to CME Group’s FedWatch tool, traders have priced in 50% odds of rate cuts at the next meeting in March.

On the British Pound front, the Bank of England (BoE) is likely to maintain the status quo on the rate for the fourth time in a row. BoE governor Andrew Bailey said in December that there was “some way to go” as the central bank believed inflation would not return to its 2% target until 2025. Nonetheless, economists expect the BoE to open the door to a change of tack later this year. 

Market players will closely monitor the FOMC interest rate decision and press conference on Wednesday. Also, the January US ADP Employment Change will be released. On Thursday, the BoE monetary policy meeting will be in the spotlight. Traders will also be looking to see whether the BoE changes its language, stating that monetary policy will most likely need to be restrictive for an extended period of time.